record of terminal market prices from day to day. In the case of many of the grades of other kinds of grain (especially the lower grades) the daily price record at the terminal market is unsatisfactory. Even in the case of wheat, despite the large volume of sales daily, prices on some of the lower grades are somewhat less complete than would be desirable.

In the case of the other grains, on account of the smaller volume of sales of different grades at the terminal market (especially the lower grades) and the consequent incompleteness of the price record, it is doubtful if computations of profits and losses on these transactions would have been sufficiently accurate to warrant presentation. Secondly, owing in part to the durum market in the Northwest, a greater number of wheat grades could be subjected to examination than in the case of any other grain. Wheat, therefore, was selected not only because of the completeness of the price record, but also because of the number of different grades involved.

PERIOD COVERED.-For all the elevators operated by the four line companies selected, the Commission obtained the grades, dockages, and weights as reported by the agents of these companies in the country when the grain was bought and the grades, dockages, and weights applied by the grain inspection department to this same grain upon its arrival at the terminal market. While these figures were taken from the books of the four line companies for all five crop years of the period 1912-13 to 1916-17, it was decided to tabulate the results for only three years on account of the large amount of labor and expense involved in compiling the data and 1913-14 to 1915-16 were selected as being representative years. A further consideration leading to this selection was the fact that the figures for 1916-17 could not be satisfactorily employed on account of the complications due to the introduction of Federal grades.

Section 10. Statistical method employed in study of grades, dockages, and weights.

In the country the grain is inspected and graded by the elevator agent (Ch. V, sec. 3). Upon its arrival at the Minneapolis or Duluth market, and before its sale, it was at this time inspected and graded by the inspection department of the Minnesota Railroad and Warehouse Commission and was sold on the basis of this inspection and grading.

If grain is overgraded in the country, it is apparent that this overgrading will appear as a shortage in one or more of the grades given at the terminal market upon inspection by the State authorities as compared with the country grades and an overage in one or more of the lower grades. Similarly, it is evident that if undergraded, this result will be reversed, an overage appearing in one or more of the higher grades given by the State and a shortage in one or more of the lower grades, as compared with the country grades.

In a similar fashion, incorrect docking or weighing will be transposed into overages and shortages in grades at the terminal market on State inspection, as compared with the quantities of such grades purchased in the country. Thus, if the grain is overdocked in the country any such overdocking will show up as an overage in one or more of the various grades of wheat on State inspection, or if underdocked in the country, as a shortage. Either overages or shortages,

as the case may be, will therefore be represented in the profits on the total net wheat. The same applies to short weights and overweights. Any underweighing or overweighing at the country points will be evidenced by an overage or shortage in at least one of the grades at the terminal market on State inspection.

So far as profits and losses are concerned, the elevators profit and the farmers lose by undergrading, short weighing, and overdocking in the country. Elevators, on the other hand, lose and the farmers profit from the reverse of these conditions-i. e., overgrading, overweighing, and underdocking. It is important to bear these points in mind in considering the statistical results subsequently presented.

In all cases the profits or losses on grades, dockages, or weights, or the total profit or loss on all combined, can be represented by the differences between the prices for net bushels bought in the country and for net bushels sold at the terminal market, since the prices paid both in the country and the terminal are, with some unimportant exceptions, practically always for net wheat.15

In computing the profits and losses on these transactions, therefore, average terminal market prices were applied to the grades reported as purchased in the country and also to the grades returned by the terminal market inspection department and the difference between the two in terms of loss or gain computed. Any carry-over of grain was treated as though shipped and as receiving from the inspection department the same grades as it had been bought at in the country.16

The average prices applied as aforesaid were computed by taking a weighted average of all sales of each grade of wheat on Wednesday and Friday of each week during each year, as shown by the Minneapolis Daily Market Record, the preceding day being used when no quotations were to be had on Wednesday or Friday. From these average daily prices the spread between No. 1 northern wheat and each other grade was worked out for each day and the daily figures for each kind of spread (i. e., between two grades compared) averaged. The daily No. 1 northern price was then averaged for the year and the average figure for each kind of spread was then added to or deducted from this No. 1 northern price to obtain the prices for the other grades.17

15 In some cases wheat will sell in the terminal at a premium on account of the value of the screenings contained therein. It is also true that in buying in the country allowances in prices are sometimes made on account of the screenings. (Ch. V, sec. 3.)

The amounts of the carry overs at the various houses were so insignificant as compared with the total handled that the slight error involved in this method of treatment may be regarded as negligible. Moreover, it was the practice of the companies in question to treat the carry over as shipped and to have attempted to secure any greater accuracy would have involved a great amount of work in separating and tabulating a multitude of small inventory items, with the certainty that the averages would be little, if at all, affected thereby.

17 A few exceptions to this rule were necessary. In 1913-14, for No. 4 spring, No. 4 durum, no grade durum, and western wheat, prices were very infrequent. In order to avoid additional computations the weighted average of prices at which sales were made for these four grades and also No. 2 northern wheat were taken from computations made for another study. The same source was used, the only difference being that the averages in this case were those of the sales of each day when comparison of these grades and No. 2 northern was possible instead of two days a week. From these average prices the spread of each grade from No. 2 northern was computed and these spreads were deducted from the No. 2 northern prices as outlined for the present study.

In 1914-15 no grade durum and western wheat were rarely quoted. Here the average prices of these grades were computed on every day when such prices were found and the daily spread was obtained by deducting such prices from average daily No. 1 northern prices computed for the same days. The resulting daily spreads were then averaged and deducted from the yearly average No. 1 northern price found as above described by averaging Wednesday and Friday prices throughout the year.

Overages or shortages upon each grade were then obtained by computing the differences between the number of bushels of each grade bought in the country and the number of bushels of each grade found on terminal inspection. These overages and shortages were then multiplied by the average price of each grade, the result being the profit or loss on each grade and the net balance on all grades combined giving the total profit or loss on grading, weighing, and docking.

In determining the profit or loss on each one of these items, further computations were required. The overages or shortages in dockages or weights are reflected in the comparison of the net weight of the wheat in the country and as inspected at the terminal market. There is no way of determining in what particular grades these overages or shortages were distributed. It is fair to assume that the distribution was in the same proportion as the distribution of the total net wheat among the different grades, terminal inspection figures as to distribution of total net wheat being employed as more accurate than the country figures. But no importance need be attached to this distribution as such. It may be regarded as merely a means of computing in terms of dollars and cents the importance of the gain or loss by reason of differences between country grades as a whole and weights and dockages, respectively, and the corresponding terminal figures.

It is possible to determine the separate gain or loss attributable to dockage and to weights, respectively, provided prices may be affixed to the quantities involved. In order to determine loss or gain on dockages and weights, the overage or shortage in each case was multiplied by an average price obtained by weighting the price of each grade according to the proportion which each such grade constituted of the total terminal inspections in net wheat. The loss or gain in quantity of dockage is directly determined as the difference between the country and the terminal figure. The loss or gain in weights is similarly the difference between the two gross total weights, including dockage. These figures multiplied into the average price described show the profits and losses on dockages and weights, respectively.

The profit or loss on grades was then determined as the difference between the profits and losses on grading, weighing, and docking combined and the profits and losses on weighing and docking as independently determined. The profit or loss in cents per bushel was derived by dividing total profit or loss by total net wheat as shown by the terminal inspections.

Section 11. Analysis of results, grades, dockages, and weights.

ALL COMPANIES COMBINED.-Table 70 presents the consolidated results of the country grading, weighing, and docking study made by the Commission according to the foregoing method. These results are not to be confused with the results of terminal elevator mixing operations which are discussed in a subsequent volume dealing with terminal market cash operations. This study covers only the differences in grading, docking, and weighing between the country elevators and the State inspection service at the terminal market, and does not extend to the terminal elevators.

1 Price for dockage and total wheat obtained by finding proportion of terminal grades to total net and multiplying price of respective grades by this proportion.

From this study it appears that on something less than 25,000,000 bushels of wheat purchased during three years these four companies sustained a net loss of over $83,000 on grading, weighing, and docking combined,* an average rate of over $27,000 a year, or about a third of a cent per bushel. On dockage a profit of about $87,000, amounting to something over a third of a cent per bushel, was realized, and on weighing about $60,000, or around a fourth of a cent per bushel. The total profits on weighing and docking together, therefore, amounted to nearly $150,000, or a rate of approximately three-fifths of a cent per bushel. As shown by the table, however, the grand total loss on grading, weighing, and docking combined amounted to $83,337.22, or a loss of 0.35 of a cent per bushel. It follows, therefore, that the total loss on grading must have been the sum of this total loss on all three factors and the profits on dockage and weights, a total of $231,151.35, or a loss of 0.97 of a cent per bushel on grades.

One qualification of the foregoing results must be made. As elsewhere indicated (Ch. V, sec. 3), elevators not infrequently fail to make any allowances for dockage either in the form of prices or by the return of the screenings to the farmer. It has also been pointed out that the tendency is for the commercial lines to clean at the terminal market, with the result that this type reports a very low percentage of houses equipped with cleaning facilities as compared with the various types of individual elevators (Ch. VII, sec. 9). Because of this lack of equipment it is impossible for many of the commercial line elevators to return the screenings to the farmer, and any allowance for dockage taken, therefore, must be made in the form of price. The general indications are that the line elevators do not always make such allowances except when compelled to do so by their competition. It is at least possible, in consequence, that the profits of the line companies shown on dockage were slightly increased by the sale of certain screenings for which no allowance was made to the farmers. Competition, however, in the bulk of cases forces allowances for such screenings, and there is no good reason for believing that the profits from this source would increase the total profit on dockages in any very considerable degree.

INDIVIDUAL COMPANIES.-Table 71 presents by years for each of the four companies studied the per bushel profits and losses on grading, weighing, and docking. These individual results are presented for companies A, B, C, and D, and are not identified with the names of the organizations from which they were obtained.

This does not mean, of course, that the entire business was conducted at a loss, but relates only to the three items in question.